Spanish Economy Minister Luis de Guindos is set to announce measures tomorrow to spur the economy, the fourth largest in the euro region. Following is a list of the main steps already taken and those recommended by the European Union and the International Monetary Fund.
*Constitutional amendment on budget stability passed in September under previous Socialist government with support of People’s Party. Accompanying law drafted by PP government and approved in April by Parliament sets out ceilings on debt and deficit and sanctions for administrations that overspend. Debt payments “enjoy absolute priority over any other spending.”
*Labor overhaul: firing costs cut and procedure made easier, companies given more flexibility on organizing workers, collective-bargaining rules changed, making it easier to cut wages.
*Pensions: Former Socialist government legislated to raise retirement age to 67 in a gradual process starting in 2013 and culminating in 2027. Move also extends number of working years used to calculate pension.
*Banks: Two decrees in February and May tightened provisioning rules for banks. EU bank bailout of as much as 100 billion euros ($129 billion) agreed in June.
*Fiscal devaluation: Employers’ social-security contributions set to fall in 2013, with value-added tax raised to offset impact. VAT increased to 21 percent from 18 percent on Sept. 1, following recommendations from the EU and the IMF. Tax break on mortgages scrapped after an EU recommendation.
*Education: overhaul aimed at boosting performance, standardizing evaluation and improving vocational training.
*Shop opening hours: measures to free up opening hours including Sunday opening. Procedures for obtaining retail licenses also simplified.
*Energy: Draft law before Parliament will increase taxes on power generators with additional levies on hydro and nuclear plants to close the power system’s 6 billion-euro annual deficit. The government will also cover 2.1 billion euros in repayments this year on the system’s accrued debt.
*Other measures include: reduction in number of public companies; plan to rein in tax fraud; transparency law; changes to nationwide regulations on health and education to help regions cut costs; liberalization of transportation; legislation to allow regional governments to privatize television stations and oblige them to balance broadcasters’ books if they choose to keep them.
*Regulation of the “sustainability factor” of pension system
*Liberalization of professional services
*Market unity law
*Law to support entrepreneurs
*Pensions: EU says worsening of crisis limiting impact of previous government’s reform on projected spending. Recommends ensuring retirement age rises in line with life expectancy.
*Labor overhaul “could be strengthened,” IMF says. EU and IMF recommend policies to bolster employability and job matching. European Central Bank suggested in August nations with high unemployment cut labor costs by relaxing employment protection, abolishing wage indexation and lowering minimum wages.
*Professional services: EU recommends removing barriers and spurring competition particularly for engineers, notaries, property registry agents, legal representatives.
*Tax: EU says taxes should be more “growth-friendly,” tax base should be broadened and Spain lags other nations on environmental taxation. System too dependent on direct taxation, EU said in July, after income tax was raised in December.
*Bureaucracy: EU recommends easing and simplifying barriers to opening businesses and seeking common regulatory framework for all regions.
*Privatizations: EU, IMF and ECB recommend asset sales.
*Healthcare: EU and IMF recommend long-term savings.
*Independent fiscal institution: EU and IMF say Spain should establish one.
*Small companies: IMF and EU urge policies to bolster their growth
*IMF recommends product and service market reforms, “supply- side” measures leading to labor reallocation, wage moderation, policies to expand tradable sector, raise productivity.
*Timetable: IMF calls for “detailed and ambitious timetable” of reforms.
*IMF recommends deregulating fuel sector and postal services.
NOTE: EU recommendations are from July, IMF from reports in June and July.
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